College savings program offers all participants tax deductions

Mike and Sandie Robertson pose for a portrait with daughters Sydney, 9, (left) and Diana, 6, at their home in Martinez. The Robertsons are saving money for the girls' college education expenses using the Georgia 529 College Savings Plan.

They could hope that a wealthy uncle would finance the college educations of their two daughters, Sydney, 9, and Diana, 6. Or they could start saving now for their daughters' future.

The Robertsons chose the second option. About four years ago, they started a Georgia 529 College Savings Plan for each daughter.

"I do want to have a start for them," Mr. Robertson said. "I'm not sure that they'll both go to college, but we want to provide that opportunity."

Chuck Penuel, the director of the Georgia Higher Education Savings Plan, said recent legislation has made the program more attractive.

Now, any contributors, including parents or grandparents, to a 529 plan can deduct their donations of up to $2,000 from their taxes.

In addition, Mr. Penuel said, legislators eliminated the $100,000 income cap so that everyone is eligible for the tax deduction.

"We really try to work with parents of young children and try to get started as early as possible and continue to save over the long term," he said.

He also said account holders can manage their own plans online.

"Because we are a direct-sold plan, there are no commissions," he said.

Mr. Penuel said the Georgia plan, which was launched in April 2002, recently exceeded $500 million in assets.

Although there are no disadvantages to the program, he said, income tax will be assessed on any withdrawals for non-education purposes. However, if a child does not go to college, he said account holders can avoid this penalty by transferring the funds to another beneficiary.

The funds can be used to cover costs such as tuition, room and board, books and fees at eligible private or public schools and at technical, vocational or graduate schools in any state.

Mr. Robertson said their goal is to be able to cover the costs of their daughters' first year in college.

"As I see them grow and they become more interested, I'm hoping that they'll do some of their own (saving), too," Mr. Robertson said.

Mrs. Robertson said it is difficult to set aside money when other living expenses come up.

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Also, the return doesn't exactly match the rate at which post-secondary school tuition is rising. $2000 saved today won't buy nearly as much college in 10 years as it would right now. The thing to do is lock in a tuition rate somewhere. Some colleges offer that option, if you think your kid would want to go there.